In 1997, the Kyoto Protocol was negotiated under the Convention and adopted. The Parties agreed by consensus that 37 industrialised countries and the EU should accept legally binding targets to reduce their collective emissions of six greenhouse gases by 5% compared to 1990 levels by the end of 2012. Each industrialised country commits to a target level of emissions for the Kyoto Period (2008–2012).

Kyoto Protocol
The Kyoto Protocol entered into force in 2005 and has since been ratified by 184 countries. The detailed rules for the implementation of the Protocol were adopted in Marrakesh in 2001, and are called the “Marrakesh Accords”. 

The Kyoto Protocol allows for three different kinds of international flexible market-based mechanisms to help countries meet their targets: Emissions Trading; Joint Implementation (JI); and the Clean Development Mechanism (CDM). The EU has set up their own Emissions Trading Scheme (ETS) transferring part of the emissions targets to the companies in the "trading sectors" and allowing the companies to meet parts of their targets by using carbon credits from the CDM called Certified Emissions Reductions or CERs.

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Buyers and sellers
Both developed countries that are Parties to the Kyoto Protocol and companies in the same countries having been delegated a compliance obligation, make up the buyer side of the market. Project developers in developing countries are the sellers.